The World Bank increases India GDP growth forecasts to 6.5% for financial year 26, reduced it to 6.3% for financial year 27 due to American rates
The high American prices and the advent of artificial intelligence (IA) create new uncertainties for the economic growth of South Asia, said the World Bank in its last update to the development of South Asia.
It increased India’s GDP forecasts to 6.5% for financial year 26 compared to the previous 6.3%, but planned growth in South Asia to slow down to 5.8% in 2026, against 6.6% in 2025. India developed at a lower 6.3% in FY27 at the back of the 50% of prices imposed by the United States.
“For 2026, the forecasts have been demoted, as some of these effects are relaxing and India continues to deal with higher prices only planned on exports of goods to the United States,” said the report published on Tuesday.
India should remain the major majority of the fastest growth in the world, supported by continuous force of consumption growth, he said, adding that interior conditions, in particular agricultural production and growth of rural wages, have been better than expected. “Government reforms to the goods and services tax (TPS) – reducing the number of tax slices and simplifying compliance – should support activity,” he noted.
However, he pointed out that India was to face prices lower in the United States that its competitors in April, but at the end of August, it faces considerably higher prices. “Nearly a fifth of India’s goods exports went to the United States in 2024, which is equivalent to around 2% of GDP,” he said, adding that the forecasts for fiscal year 27 have been demoted due to the taxation of a rate of 50% on approximately three-quarters of India goods exports to the United States.
In addition to 50% prices on India, the United States has imposed a tariff of 20% in Bangladesh and Sri Lanka and 10% in Nepal, Bhoutan Ad Maldives. “Because of these increases, most of the goods exported from Bangladesh to the United States are faced with a rate totaling 35%; Sri Lanka, 30%; and India, 52%,” said the report, adding that certain categories of goods are subject to specific prices for products that are generally lower than those of specific prices, but can increase in the future.
“The increase in the opening of trade and the growing adoption of the AI ​​could be transformers for South Asia,” said Franziska Ohnsorge, chief economist of the World Bank for South Asia. “Political measures to facilitate the reallocation of workers between companies, activities and locations can help channel resources to productive sectors and are essential to stimulate investment and job creation in the region,” she said.
The report also suggested that South Asia could strengthen foundations to maximize the advantages of AI by increasing the share of skilled workers and ensuring reliable electricity, as well as coherent and rapid internet access. “Improvement of infrastructure and the facilitation of the mobility of the workforce can help maximize the advantages of AI while minimizing the disruption of the labor market,” he said.
He noted that in South Asia, around 22% of jobs are exposed to AI, as measured by overlapping between the skills required in an occupation and the capacities of the generative AI.
The workforce of Southern Asia has an exposure limited to the adoption of AI due to the predominance of jobs with a low, agricultural and manual job, he said, while warning that young moderately educated workers, in particular in sectors such as commercial services and information technology, are vulnerable. “Since the publication of Chatgpt, job lists have dropped by around 20% in the most exposed and replaceable jobs by AI compared to other professions,” said the report.
Its recommendations include steps to help accelerate job creation by rationalizing regulations dependent on size that discourages business growth, best transport and digital connectivity, more transparent housing research, implementation and job correspondence, as well as to provide safety nets for affected workers.
